Meanwhile, your tax returns themselves are a different story. The IRS says that if you don`t file a tax return or a fraudulent return has been filed on your behalf, your best bet is to keep all tax returns forever. Managing all the important paperwork for a household is confusing enough, but things can get even more complicated for family caregivers who also have financial and medical authority (POA) and help monitor the records of their aging loved ones. To help caregivers reduce their paperwork and create a simple filing system, I have provided general rules for the most common documents below. However, be careful when getting rid of original documents. Don`t throw anything away unless you`re sure you can get another physical or electronic copy of a file from the bank, insurance company, doctor, your employer, etc. This applies in particular to estate planning documents such as a permanent power of attorney, will or living will, which usually provide for incapacity for work or future death. The complete list of important documents that must be kept forever includes: When it comes to taxes, it`s best to keep all tax records for at least seven years. The IRS statute of limitations for auditing is three years. However, there are circumstances in which they can go back up to six or seven years, such as if you have an income that is undervalued by 25% or more.
State statutes of limitations can vary, so ask a tax professional about restrictions in your state. If you received property as part of a tax-free exchange, your base in that property is the same as the basis of the property you gave up, plus the money you paid. You must keep records of the old property as well as the new property until the statute of limitations expires for the year in which you own the new property. Do you have any other questions about the retention period for documents that are not covered here? Call our Consumer Action Centre. We could all use less paperwork in our lives. However, it is advisable to be careful when cleaning your files. When it comes to essential legal forms or contracts, the question should be how long you should keep important documents, not whether they should be kept at all. However, nowadays, it is also common to receive or keep digital versions of your records.
You can often receive bills and bank statements electronically rather than by mail. This makes e-filing a much more convenient option for modern accounting. Here`s what could be included in the documents you want to throw away: You`ll need to keep them until you sell the securities they cover to prove whether you`re incurring any capital gains or losses on your tax return. If you hold stocks or bonds for many years, you must keep the statements. The exception is if the base cost and time of purchase are indicated in the statements. In this case, you only need to keep the year-end statements to support your tax return each year. You can go even further with it. It makes sense to scan all your important paper documents so you have a backup in case something happens to the originals. All you need is a scanner and a secure hard drive or USB stick. However, make sure to back up everything regularly, just in case.
If you made an after-tax contribution to an Individual Retirement Account (IRA), you must keep your records of those contributions indefinitely. Otherwise, you will not be able to prove that you have already paid taxes on this money when making a withdrawal. Without a thorough record, you risk paying unnecessary taxes on distributions that should be tax-free. Keep all medical bills and receipts such as cancelled checks or credit card statements until you are sure that the bill has been paid in full by you and/or your insurance company. If you deduct unreimbursed medical expenses on your tax return, keep all receipts described above. Remember to keep all health-related bills, including dental care, vision, hearing aids, and over-the-counter medications, to name a few. When making life and financial decisions, there is usually a paper trail. The same applies if you buy, sell or insure something. And after tax season, every year there is another batch of documents that you can add to your records. What should you keep and what can be thrown into this week`s garbage collection – that is, what needs to be shredded and disposed of properly? The IRS suggests keeping the W-2s, 1099s and related documents for three to seven years. However, depending on your individual tax situation, it may be advisable to keep them longer.
If you go the digital route, it may be a good idea to make multiple backups in case one of them gets corrupted or fails. Digital backups take up much less space than multiple hard copies of your important documents. “I keep my valuables in a big fireproof safe. It`s well hidden and far too heavy for anyone to get out. You need to keep some documents longer than others, and for financial and estate planning purposes, these documents need to be organized and accessible. Some documents need to be kept forever, others for shorter periods – but many documents aren`t really important enough to store. While it may seem like a good idea to stick to everything, the resulting clutter could make it difficult to find important documents among all the unimportant documents. And even with digital documents, you can still run out of space. Let`s help clear up this confusion by offering some guidelines on which documents should be kept and for how long.
But pay close attention to this part: when it comes to a statement that shows your mortgage balance is paid off in full, you want to keep that documentation forever. Many financial, medical, or legal documents are valid over a long period of time and can be critical to your file over the years. The last thing you want is for essential tax records, estate planning tools or proof of ownership and contracts to be lost when they are needed most. So that`s an overview of how long certain documents are kept. But some documents can be destroyed much faster after they enter your life: it`s best to keep your tax returns as long as possible. If you ever face a tax audit, you`ll have all the information you need. You should also consider storing documents that verify information on your returns for at least seven years, such as W-2 and 1099 forms, receipts, and payments. If you have receipts for assets, such as receipts for renovation projects, keep them for as long as you own them. *These documents must be kept in a very secure place, for example: in a safe.
You can throw away most monthly bills after you pay them or after the payments have been credited to your bank statement. If you end up going back to verify something, check if you can access past invoices through online account access. Many companies keep past invoices and invoices from the last few months or more available online. The main reason for filing financial documents is to be able to defend your annual tax returns when needed, but there are other reasons to save certain types of paperwork. Here`s a quick guide on what to do with your financial documents: how long to keep important documents, how to keep the documents you keep, and how to dispose of the rest safely. A number of documents should be saved forever. These are the main ones that you will need at any time in the future for various reasons. Making sure they are kept in a safe place and that a copy is safe will save you a lot of time when they are needed. To get started, you`ll need a scanner and a location for your files: a folder system on a computer and a cloud backup, as well as an external hard drive. The more backups you have (home and offsite), the better prepared you`ll be to get rid of that pile of paperwork without worrying about losing anything important. Keep all records documenting the purchase price of a property, the cost of any improvements, and records of expenses spent on the sale and purchase of real estate for seven years after the sale or purchase.
As your financial life becomes more complicated, it`s hard to know how long you`ll keep documents and when it`s safe to dispose of them. Some things you have to hold on to all your life and others only for a few months. You probably already know that important documents such as tax returns, bank statements, and payslips require special attention, but for how long and in what format? And what is the best way to protect all this personal data? We`ve put together seven tips in two categories: how long to keep documents before shredding them, and how to properly store sensitive information. How long should you keep mortgage statements? The answer depends exactly on the documents you are talking about as part of your home payment. If you`re wondering how long to keep mortgage statements, tax records, and other documents, chances are you want to manage a tidy ship at home, but you just don`t know which documents to part with and when. The statute of limitations is the period during which you can amend your tax return to claim a credit or refund, or the IRS may impose additional taxes. The following information reflects the limitation periods that apply to tax returns.